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# Monthly Cash Budget: Cyrus Brown Manufacturing

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1 Excel Spreadsheet and a 1-2 page Word doc
Details:

To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next 9 months:

March \$250,000
April \$275,000
May \$320,000
June \$450,000
July \$575,000
August \$700,000
September \$825,000
October \$350,000
November \$285,000
He has also gathered the following collection estimates regarding the forecast sales:

Payment collection within the month of sale = 10%
Payment collection the month following sales = 65%
Payment collection the second month following sales = 25%
Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:

March \$187,500
April \$206,250
May \$240,000
June \$337,500
July \$431,250
August \$525,000
September \$618,750
October \$262,500
Additional financial information is as follows:

Administrative salaries will approximately amount to \$35,000 a month.
Lease payments around \$15,000 a month.
Depreciation charges, \$15,000 a month.
A one-time new plant investment in the amount of \$95,000 is expected to be incurred and paid in June.
Income tax payments estimated to be around \$55,000 will be due in both June and September.
And finally, miscellaneous costs are estimated to be around \$10,000 a month.
Cash on hand on March 1 will be around \$50,000, and a minimum cash balance of \$50,000 shall be on hand at all times.
To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.

Prepare a monthly cash budget for Cyrus Brown Manufacturing for the 9-month period of March through November.
Use Microsoft Excel to prepare the monthly cash budget.
Based on your cash budget findings, answer the following questions:
Will the company need any outside financing?
What is the minimum line of credit that CBM will need?
What do you think of CBM's cash position during the budget period? Do you see any concerns for the company in this regard?
If you were a bank manager, would you want CBM as your client? Why or why not?

The work must include the following:

A Microsoft Excel spreadsheet that contains your monthly cash budget for Cyrus Brown Manufacturing.
A double-spaced Word document of 1-2 pages that contains the answers to the questions.

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#### Solution Preview

Prepare a monthly cash budget for Cyrus Brown Manufacturing for the 9-month period of March through November. Use Microsoft Excel to prepare the monthly cash budget.

See excel sheet attached. Click in cells to see formulas used.

Will the company need any outside financing?

Yes. Review the analysis of financing needs at the bottom of the cash budget. The subtotal of "ending cash before LOC" (LOC = line of credit) shows what the cash balance is before financing. If the balance is below the required \$50,000, I show an advance from the line of credit. If there is cash above the \$50,000, I show a repayment. The balance in the loan is shown at the bottom and keeps track of the financing. I have not included a line for interest costs but that might increase the ...

#### Solution Summary

Your response is 468 words plus a cash budget and analysis of financing needs report. The report shows the beginning cash, inflows, outflows and cash before financing. Then, the report shows advances and repayments and keeps track of the loan balance for you.

\$2.19